Ping!
I’m a bit surprised at this.
Way to go Fed! Cave in to the importers and merchants, and see what happens! You should have cut it a half of a point, so we can get some US manufacturing and strength going.
I’m going to anthropomorphise the market and state that it’s throwing a tantrum because they didn’t get as big a cut as they wanted—it’ll rebound tomorrow after they’re all cried out.
However, I think people forget that given the current high level of the DJIA of over 13,000, dropping 300 points has negligible effects.
This is very complicated. The market was rising in anticipation of a 1/2% cut, and with the 1/4% cut it had to back up about halfway. That may sound simple, but it is simplistic rather than simple. The whole market is more than just the DJIA/NASDAC, and includes commodities and bonds and other instruments.
Why does the Fed think that high interest rates caused the problem [so think lowering the interest will solve it]?
The big disappointment today was over two things, neither of which was the FED funds rate cut of .25%. That was expected and already discounted. The market probably would have sold off somewhat if that was all that happened, since it had rallied lately and was overbought.
The problem was that the market was hoping for a .50% cut in the Fed discount rate, and only got .25%. This rate is too high compared to current bond rates, and is punitive to the credit markets. Also, the statement was considered wishy-washy, as it did not show conviction but rather a wait-and-see attitude. This makes investors feel that the FED is groping in the dark rather than taking control.
Such is life. I think I’ll take my mutual fund and buy real estate.
The market is like a spoiled child. If it doesn't get what it wants, it throws a tantrum.
And the Fed had more to consider...maybe it's waiting for more interest rate cuts in Europe so the dollar doesn't go into free-fall...
Buy speculation, sell news.
Elevator going down.
Ben Bernanke is an idiot.
sw